The alignment of chief executive salary packages with market capitalisation has been highlighted in Business News’ latest quarterly salary survey.
The alignment of chief executive salary packages with market capitalisation has been highlighted in Business News’ latest quarterly salary survey.
The survey also shows that the big upside for chief executives in Western Australia comes from share options, in contrast to ASX 20 companies that usually award generous bonus schemes on top of their large salaries.
The biggest WA salary package unveiled over the past three months was for gold and nickel miner Independence Group, which also has by far the largest market cap of companies in the survey (see table below).
Its new managing director, Peter Bradford, will be paid a base salary of $750,000, roughly in line with his predecessor, Chris Bonwick, who was paid $723,100 (ex-superannuation) last financial year.
Mr Bradford will have the opportunity to earn an annual cash bonus up to 40 per cent of his salary and a long-term incentive up to 100 per cent of his salary, paid as performance rights.
To put this in context, Melbourne-based gold miner Newcrest Mining this week unveiled the salary package for its new managing director, Sandeep Biswas.
His package starts with a salary of $2.3 million, inclusive of superannuation.
If Mr Biswas meets his performance targets, he qualifies for an annual bonus equal to his salary; if he exceeds his performance targets, the annual bonus can be up to double his salary.
He can also earn a long-term incentive up to 150 per cent of his salary.
National Australia Bank’s newly appointed managing director Andrew Thorburn has a very similar package, with a salary of $2.2 million and an annual bonus of up to 175 per cent of his salary.
This kind of upside is generally not on offer to WA chief executives, but some like new Empire Oil & Gas boss Ken Aitken have plenty of ‘blue sky’ potential courtesy of their share options.
Mr Aitken has joined Empire after a tumultuous period that saw shareholder ERM Power gain control of the Mid West gas producer.
His package comprises a salary of $430,000 along with 90 million share options exercisable at prices of 2 cents, 3.5 cents and 7 cents.
Empire’s prevailing share price is 0.9 cents, indicating Mr Aitken has considerable work ahead of him before the options are ‘in the money’.
The past quarter has seen a continued trend toward lower salaries.
Venturex Resources, for instance, announced a 12-month extension of managing director Michael Mulroney’s contract, but on a lower salary of $275,000. He was appointed two years ago on a salary of $350,000.
Other companies to have cut chief executive salaries over the past year include Forte Energy, Diploma Group and AnaeCo.
Another emerging trend is for chief executives to work part-time in the designated role, allowing them to pursue other interests.
Zenith Minerals managing director Michael Clifford, who is on a salary of $210,900 inclusive of superannuation, plans to spend a minimum 74 per cent of his “normal working hours” attending to Zenith matters.
Gippsland managing director Michael Rosenstreich plans to commit 80 per cent of his time to the company, which is looking to develop the Abu Dabbab tantalum project in Egypt.
Similarly, Kresta Holdings managing director Xianfeng Lu plans to spend 80 per cent of his time working for the blinds manufacturer and retailer.
In an added twist, China-based Mr Lu has committed to spend at least 50 per cent of his time in Australia.
All costs relating to travel between Australia and his residence in China, and accommodation costs in Perth, will be borne by Mr Lu.
